Gold production at Medusa Mining's (ASX:MML) flagship Co-O mine in the Philippines was slightly lower this quarter than the previous one but much higher than the same period last year.

The firm said 23,940 ounces of the yellow metal were produced in the three months to end March this year compared to 16,200 ounces in the first three months of 2014 and compared to 26,850 ounces in the quarter to end December, 2014.

The reduced ounces were due to a number of factors, including shut down of the Level 8 shaft for an upgrade.

The head grade was 5.84 g/t compared to 5.56 g/t in the previous three months, while the recovery was also improved at 94% compared to 93% in the last three months of last year due to tweaks to the milling circuit.

Cash costs were US$391 per ounce compared to US$380 per ounce in the previous quarter, while gold sold was 17,169 ounces, down from 28,190 ounces in the preceding quarter.

For the year to end June, the miner is guiding for output between 95,000 and 100,000 ounces.

Ramp up of production to meet an increased capacity of 1,400 tpd is progressing on schedule, the firm added.

Earlier this month, the group said construction of a US$10mln underground service shaft had kicked off, which will take around 17 months, and lift the total mine capacity to around 2,700dtpd (dry tonnes per day) from all shafts. The estimated pay back time is 1.4 years.

Resource focused broker SP Angel said the numbers showed an improving trend in operations at Co-O.

"After an extended period of disappointment, the new management team are turning things around. The build up in availability of ore from Level 8 shaft and the initiatives to mitigate dilution are all likely to lead to better throughput and grades," it said.

"This should enable costs to come down from here. Guidance for this year should be met and we look forward to the guidance set for next year with some scope to upgrade production ounces from here."

The broker rates the shares a 'buy'. Its target price is under review.

Quick facts: Medusa Mining

Price: 0.68 AUD

ASX:MML

Market: ASX

Market Cap: $141.3 m

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